Question

Economic theory offers ____________________ about the full range of possible events and responses, which can prevent __________________ about how households will respond to changes in prices or incomes.(A) One budget constrain theory; unrealistic possibilities (B) a systematic way of thinking; misguided conclusion (C) Two budget constrain theory; misguided possibilities(D) systematic consumption choices; unrealistic conclusion

Answer 1

Answer: The correct answer is "B".

Explanation: Economic theory offers "a systematic way of thinking" about the full range of possible events and responses, which can prevent "misguided conclusion" about how households will respond to changes in prices or incomes.

Answer 2

Answer: (B) a systematic way of thinking; misguided conclusion

Explanation: Economic theory offers a step by step approach to a wide range of events that may occur and likely responses to be adopted which can help prevent misguided conclusions about how households will respond to changes in prices or incomes. Since households are the basic unit of every economy, the economic theory is useful to the understanding of economic policy of nations. Economic theories are a system of assumptions, hypotheses, definitions and instructions that attempts to explain economic situations, to interpret why and how the economy behaves the way it does, and to proffer the best to solutions in influencing or to solving the economic problems. Doing so helps prevent misguided conclusions to phenomena that might result in wastage of time and worsening of economic conditions.